The way Royal Bank of Scotland will pay for insurance to cover up to £250bn of its toxic assets is being finalised by the Treasury ahead of the bank's results on Thursday. RBS and Lloyds Banking Group, which is also likely to buy the insurance, are thought likely to issue new shares to the government which will not carry voting rights but may be able to pay a dividend. Crucially, the government wants to avoid having to increase its stake in RBS above the 68% at which it already stands.

Lloyds, 43% owned by the taxpayer, may put up to £200bn of assets into the scheme while it is not yet clear whether Barclays will want to insure some of the more troublesome assets on its books. The banks could face multi-billion pound bills each year for the insurance, which also needs the approval of the EU.

The government is expected to demand that the banks which participate in the asset protection scheme adhere to requirements to lend to businesses and homeowners. There will also be restrictions on pay, possibly similar to the ones set out by RBS last week when it promised not to pay cash bonuses for two years and make any payments deferred so that they could be clawed back at a later stage.

The Treasury is thought to regard the requirements on lending as a crucial part of the scheme. It has tried to kickstart lending in the mortgage market by changing the remit for Northern Rock which could be loaned another £14bn by the taxpayer to channel into home loans. RBS has already agreed to put another £6bn into lending and Barclays is likely to be watching, to see what restrictions are attached, before deciding whether to participate.